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Thursday, February 9, 2017

Want to know if your existing apartment complex is ready for a condo conversion?

As an MAI designated appraiser, many clients have come to me for an analysis as to whether or not their existing apartment complex is ready for immediate condo conversion.

Recently, there has been a spike in interest from multi-tenant apartment owners and Realtors if the highest and best use of their property is for condo conversion. This interest is mainly due to rapidly rising housing rents, low interest rates and a lack of affordable housing supply for mainly first time millennial buyers.

In many situations, the apartment owners can possibly have readily available condo buyers by converting their existing rental tenants that currently reside in their buildings. When these renters realize it is cheaper to buy their unit then to continue renting, it becomes a win/win situation for both the landlord and tenant.

Even if this built-in demand exists for your property, how do you know if condo conversion isn’t your best exit strategy as opposed to just selling the property as an apartment complex?

The only way to tell if condo conversion is your best option is by conducting two separate appraisals on the property. The first appraisal assumes you will sell the property as it exists as a fully leased apartment complex at stabilized occupancy and at current market rents. This appraisal indicates the property’s current “as is” Market Value.

The second appraisal assumes you will convert the apartment complex into a condominium complex and sell each condo to individual buyers until all are sold out. This appraisal indicates the property’s current “as is” Bulk Market Value.

Whichever of these to “as is” values is higher represents the property’s highest and best use. Even if you don’t intent on converting your existing apartment complex into condos, you should always sell your property based on its highest and best use corresponding value.

If your property’s current “as is” Bulk Market (as a condo conversion) is higher than the property’s “as is” market value (as an apartment complex), sell for the higher value. Don’t leave any money on table! Your buyers are condo converters NOT apartment investors, in this case.

The problem apartment owners have in selling their property is determining what the highest and best use of their property might be. To hire an MAI appraiser, like myself, would involve two separate appraisals as indicated above. This would cost several thousand dollars and possibly take weeks to complete.

If you choose to have a professional appraiser prepare both appraisals, you will only receive the reports one time indicating values as of the date of the appraisers inspection. If appraisals indicate condo conversion, you will have to pay the appraiser to update the appraisal as more reliable data becomes available to you as you start the conversion process.

To appraise the property as a condo conversion, the appraiser or property owner must know the following major components of value.

Cost and time it will take to entitle the property for condo conversion

Individual condo retail selling price points

All cash competitive property yield based on the risk of the project

Entrepreneurial profit needed to entitle and sell out the project

Costs and expected time it will take to sell all the condos (absorption rate)

Temporary rental income and expenses as complex is sold out as condos

As the apartment owner, you might already know many or all answers to these questions. Even if you not sure, a “best guess” will give you a rough idea of your property’s “as is” Bulk Market Value if converted to condos. If this value is significantly higher than your property’s “as is” market value as an apartment complex, you might want to further explore condo conversion as the highest and best use of the property.

Through technology, there is now a way for you to personally solve these problems, fast, inexpensively, without bias or appraiser mistakes, and be able to update the appraisal as more verified data becomes available. You can even keep monitoring the progress of you condo conversion once you commit to proceed.

This technology was created by certified MAI designated appraisers using generally accepted appraisal processes and financial modeling that would normally cost you thousands if prepared by professional appraisers.

With this recently developed cloud based technology, there is a way you can obtain by yourself both the initial “as is” value for an apartment complex and the “as is” Bulk Market Value for a proposed condo conversion.

For more information, press HERE and take a look at a sample appraisal report you can generate yourself for appraising your property as an apartment complex. Or, Press HERE and take a look at a sample appraisal report you can generate yourself for appraising your property as a condo conversion.

Taking advantage of this new technology gives you an early advantage in this rapidly emerging condo conversion trend. By receiving more information about this new self help procedure, you will be given access to MAI designated appraisers that can answer all your questions.

Monday, February 6, 2017

WANT TO GET INTO COMMERCIAL REAL ESTATE?

Here’s how to successfully break-in using stunning new technology

Just out of college, I was determined to build my wealth in real estate. It was daunting when faced with the bodies of knowledge I had to master in order to be successful, i.e. investment analysis, appraisal standards, brokerage, financing, risk analysis, construction management, financial feasibility, market studies, etc.

After getting a real estate license my freshman year of college and selling houses in-between semesters, I started interviewing successful developers and real estate investors of income producing properties and subdivisions.

The most constructive advice I received from many of my interviews was “you’ve got to make your money on the buy not the sell”. This cryptic sage message wasn’t exactly clear to me and I pressed them for explain more in detail. They told me this advise entails a body of knowledge that only comes with professional training and experience.

So, my junior year of college, I started working for a local MAI designated appraiser with the intent on gaining the professional training I needed. After two years of appraising single family houses, I was promoted to a commercial appraiser when I graduated from college. Now I had better access and information due to my appraising commercial developments, major remodeling projects, and subdivisions at various stages of development.

Over the years, I Learned how developers “made money on the buy” by using time consuming financial spreadsheets to lessen their risk of financial loss (this was before computers!).

After receiving my MAI appraisal designation, I personally began developing and remodeling commercial real estate. I used the secrets I learned in my professional training as well as the secrets I coaxed out of the successful developers in which I had appraised their proposed projects.

Even when computerized spread sheets became available, the task of “crunching the numbers” before I purchased a property for development or remodeling was tedious, time consuming and mistake prone unless I heavily reviewed my work.

As an appraiser, I continued my appraisal practice charging clients enormous fees to produce these kinds of investment analysis to early stage developers with proposed projects. Client projects ranged from:

Developing income producing properties or subdivisions (including condo projects) from vacant land

Purchasing existing income producing properties that presently were NOT at stabilized occupancy and/or market rent(s)

Purchasing existing income producing properties that were presently at stabilized occupancy and at market rent(s)

Now technology has advanced to such a advanced degree that complicated investment financial spreadsheets are available on-line. Software developers have refined the user experience making these once complicated models easy to use and easy to interpret the results.

All the financial models have been constructed and reviewed to meet generally accepted appraisal standards. I just wish I had access to this technology when I was first starting out in commercial real estate. It would have saved me years of professional training and experience needed to create these models myself. I could have avoided the many financial mistakes I made over the years keeping me from fast tracking my present net worth and financial independence.

If you’re starting out in commercial real estate or even if your a seasoned pro, take a look at the technology advances that have recently been developed for CRE by pressing HERE. Not only will this technology save you thousand of dollars in professional fees for in early stage investment valuation and analysis, but will also prevent you from making critical financial mistakes. You will also be able to constantly update your analysis with a single click of your mouse as more reliable data becomes available and economic conditions change.

This technology will enable you to “make your money on the buy, not the sell” by providing you the initial and on-going game plan for your proposed residential or commercial project or purchase.

Here’s the best part. Even if you hire a professional appraiser or analyst, they cannot indicate to you if your property’s current market value or proposed finished market value has entered a dangerous bubble.

No matter what your property’s current market value might be, automated investment analysis and machine learning can now tell you if your property’s current or proposed value is in a bubble. This new value sustainability feature uncovers hidden risks that, until now, have never been available to the general public and unsuspecting buyers.

Click HERE to see examples of sample reports of automated investment valuations and analysis for various property types at different stages of development. No matter if your a buyer/seller, developer, remodeler, broker, lender or investor, you will eliminate the severe learning curve, expensive initial professional costs, and the excessive time it takes to receive a similar report from a professional. You will also avoid the hidden risks of real estate bubbles that have never been available before.

Remember, with proper planning using this new technology, you will be making your money on the “buy” not the “sell” similar in a way the most successful developers plan their proposed developments and commercial property purchases.

About Me

Mr. Dozier has more than 43 years of appraisal experience and is a 40 year life member of the Appraisal Institute. He is a designated MAI member (the Appraisal Institutes highest designation) and also is a licensed real estate broker for more than 40 years. He graduated in 1975 from the University of Kentucky with a bachelors degree in business administration.
Raymond is the president of Dozier Appraisal Company, founded in 1980, and he is also the founder and CEO of Valuexpose, Inc, an enterprise software company specializing in patent pending valuation tools that will help prevent devastating speculative real estate bubbles.
Mr. Dozier has extensive expertise in valuation of all types of complex real property interests and of closely-held businesses. Mr. Dozier has extensively testified as an expert witness in Superior, US District and Federal Bankruptcy Court concerning valuation issues. He also served as a guest instructor at The University of Kentucky teaching corporate finance and the time value of money methodologies.
Mr. Dozier resides in Southern California (Palm Springs area).